India elected a new leader and new government, a change
that could pave the way for a shakeup in the countrys
industrial minerals market.
For the first time in three decades, India has a government
with a clear majority after the broadly right wing Bharatiya
Janata Party (BJP), led by Narendra Modi, won the election by a
clear margin, taking 340 of the 543 seats in the Indian
|India's newly elected Prime Minister Narendra Modi
has promised to reform the country's economic policies
with measures that could see domestic mineral resources
exploited to their full potential (source: Narendra
India is rich in industrial minerals, it has been unable to
exploit them fully, partly due to pressure on previous
governments to pursue populist policies, rather than tough,
Since 1984 and
until the election of Modi, coalitions and alliances have
dominated Indian politics, resulting in drawn out consensus
building and delays to much economic needed reforms. In the
last few years, this situation has led to ballooning government
debts, a weakening rupee and falling investor confidence.
Indias inefficient industrial minerals sector includes
the domestic production and imports of graphite.
huge graphite deposits of around 11m tonnes second only
to Chinas reserves Indias graphite import
volumes have doubled since 2009, to 23,291 tonnes last year.
Meanwhile, domestic graphite production has rested at around
25,000 tpa from 2008-2012, according to figures from IM
India is also
has large feldspar
reserves, but a recent rise in Indian exports means domestic
consumers have resorted to importing of the glass and ceramics
mineral. While feldspar production increased by 10% between
2009 and 2012, to 430,000 tonnes, imports have jumped 700% to
over 51,000 tonnes in the same period.
Modi has a track record in promoting economic growth. Before
becoming Prime Minister of India, he was chief minister for the
state of Gujarat for over a decade. During that period,
Gujarats gross domestic product (GDP) outperformed other
states due largely to his policies, which have been dubbed
Modinomics by commentators.
reducing the states deficit of Indian rupee (INR) 67.32bn
($1.15bn*) in fiscal year 2001-02 to a present surplus of INR
46.02bn ($0.79bn), and attracting INR 39 trillion ($667bn) in
foreign investments via the Vibrant Gujarat Investors Summit
He has also
focused on developing the states industrial and
agriculture sectors. Gujarat now has over 10% of Indias
factories, despite having less than 5% of the population. The
state has also doubled its milk production in the last 10 years
to 10.32m tonnes (9.66m litres) at present.
expected to try and repeat these successes on a national level,
with policies that could positively impact the countrys
industrial minerals sector.
One of the
BJPs priorities is to improve the productivity of
Indias manufacturing sector, with the aim of boosting
exports and international revenue.
no longer remain a market for the global industry. Rather, we
should become a global manufacturing hub, the BJP said in
its election manifesto.
economic freedom will break open the economic space to new
entrants, especially in the form of small and
medium-enterprises [SMEs], creating jobs and prosperity,
SMEs to increase manufacturing output could translate into
greater mineral demand, including in the foundry and
refractories sectors for machine parts.
manufactures large volumes of cement as well as ceramics and
steel. Growth in these industries is likely to increase demand
for minerals such as
bauxite, magnesite, kaolin and
feldspar, which could be supplied domestically, if production
can be increased.
Modi is also
expected to encourage overseas miners to invest in India.
Already, he is exploring the possible breakup of state-run
India Coal Ltd and allowing foreign funds to invest in the coal
sector to boost production. Similar measures could be used to
encourage industrial minerals development.
tenet of the BJPs manifesto was a promise to tackle
corruption in the mining sector.
years, it has been noticed that country's tangible and
intangible resources have been looted with impunity, the
adverse result is being felt on two sides: Firstly, the
proceeds of the resources have not gone to the public
exchequer. Secondly, because of this culture of usurping, the
same resources are not available for public purposes. The
management of natural resources is marred with either
misappropriation or misallocation. This has to be set
Plans to reform
dealings in the sector include setting national policies on
industrial mineral resources, specifying how much should be
utilised, at what time and the rate of production and who
should be allotted responsibility.
Investing in agriculture
agricultural sector employing around 47% of Indias 1.2bn
population, according to data from the World Bank, Modi has
also highlighted the need to modernise and expand this
Agriculture is the engine of India's economic growth and
the largest employer, and BJP commits highest priority to
agricultural growth, increase in farmer's income and rural
development, the party said.
include increasing public investment in the sector and
reforming land acquisition to increase the use of arable
the agricultural sector will require increased consumption of
fertiliser minerals, such as potash, phosphate and
of which India
hit a five-year of 401,700 tonnes in 2013, compared with
297,000 tonnes in 2012. Over the last five years, phosphate
imports have jumped by 44% to 7.18m tonnes in 2013.
succeeds in growing the agricultural sector, this could have
ramifications in the global minerals market, as major nutrient
mineral producers such as Russia, North America and Chile
increase production to meet demand.
years ago, China and India were seen as drivers of global
commodities demand due their rapid economic growth.
paths of the two countries started to diverge at the end of
2000, when Chinese growth started to accelerate and Indian
growth started to lag behind a trend which had a
knock-on effect in terms of respective commodities demand.
French bank Societe Generale, this difference has become more
pronounced in the last five years.
specifically, as the economy began to stagnate, there was a
clear shift in [Indias] demand profile relative to the
same consumption trends in China, the bank said.
In 2008, hit by
the global financial crisis, Indias GDP growth was 3.9%,
down from 9.8% in 2007. After that year, the economy has
recovered slightly, but growth has continued to stutter.
Generale forecasts that Indias economy will experience
accelerating growth over the next three years, but says it
remains uncertain whether the country can become the next
China in terms of commodities demand.
forecasting Indian GDP to rise to 5.3% in 2014, 6.1% in 2015
and 6.2% in 2017 - only time will tell whether Modi can
translate what he has achieved in Gujarat across the rest of
India, the bank said in recent research note.
commodities investment perspective, we will likely need more
time to see whether the Indian economy accelerates to become
the next China, it added.
*Conversions made June